ORR begins the legal process to implement its determination of Network Rail’s funding from 2009-14

19 December 2008
ORR/36/08

The Office of Rail Regulation (ORR) has issued the review notices which start the legal process to implement its determination of Network Rail’s outputs and funding for 2009-14, which takes effect from 1 April 2009.
The review notices make the necessary changes to the access agreements for all passenger and freight train operators, and users of stations. The changes to the access agreements along with the deeds of grant between Network Rail and government will allow Network Rail to recover the income necessary to fund the required improvements to safety, performance and capacity it will make during 2009-14.

ORR is also publishing details of a package of proposals to make changes to Network Rail’s network licence, by strengthening the obligations and making it more purpose driven. This will give Network Rail an appropriate level of flexibility about how to deliver its high-level obligations, while allowing the regulator greater scope to intervene where it can have the most benefit to Network Rail’s customers, funders and other stakeholders.

Following extensive discussions with the industry and consideration of all the responses received to our consultations, ORR is now publishing the formal statutory consultation proposing these licence changes. Subject to responses to the consultation and Network Rail’s consent, ORR plans to make these changes in time for the start of the next control period on 1 April 2009.

Network Rail has until 5 February 2009 to accept or reject the review notices. If Network Rail rejects the determination, ORR expects to refer the review to the Competition Commission.

The statutory consultation on the proposed licence changes also runs to 5 February. 

Notes to Editors

1. Control period 4 (CP4) starts on 1 April 2009 and will end on 31 March 2014.
2. The review notices are given under paragraph 4 of Schedule 4A to the Railways Act 1993. The changes given effect by the review notices relate to the track access and station long term charges payable by train operators and users of stations and the arrangements for the performance and possessions regimes. These can be found on our website: http://www.rail-reg.gov.uk/server/show/nav.1917
3. The review notices follow ORR’s determination of Network Rail’s outputs and funding for 2009-14 which was published on 30 October 2008. Since that time Network Rail has produced the detailed price lists consistent with the determination and charges which ORR has audited.
4. Network Rail recovers its revenue requirement principally through track access charges paid by franchised passenger and open access passenger and freight train operating companies; station long term charges paid by station users; network grant paid by the Secretary of State for Transport and Scottish Ministers; and income from property sales and rental.
5. The Secretary of State for Transport and Scottish Ministers and Network Rail have also executed the deeds of grant which make provision for payments from the two government to Network Rail of network grant, which is paid in lieu of fixed track access charges.
6. ORR has determined that Network Rail will need income of £26.7bn in CP4 to operate, maintain, renew and enhance the railway network. Of this, £25.0bn is expected to be recovered through track and station long term charges and grants, with the remainder from other sources such as property sales and rental.
7. As part of the licence proposals ORR is including the criteria by which it will consider Network Rail’s assessments of the case to restrict the use of the financial indemnity mechanism (provided by government to guarantee Network Rail’s debt) and introduce unsupported debt during CP4.
8. ORR is also publishing its procedural document that sets out the process by which it expects to carry out an interim review plus the target timescales for carrying this out. The procedural document provides more detail to, and should be read in conjunction with, the determination document published on 30 October 2008.
9. ORR is also publishing a letter that it has sent to Network Rail which provides clarifications on a number of issues relating to its determination that Network Rail has raised with ORR since its determination was published
10. Should ORR refer its determination to the Competition Commission, while the Competition Commissions review is in progress ORR’s determination will apply.

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